Best approach to trading up in 5 or so years

House will likely get small when kiddo grows up and if we are fortunate to add some siblings. If I want to trade up in the next 5 or so years, what is the best approach. Should I just focus on overpayments and have the outstanding balance low as possible to increase my equity when I see or should I be putting aside cash? Or some combination of both?

I'd think you should focus on having cash on hand for the 20% deposit you'll need.

Your definitely need some form of savings. At a minimum look to have enough funds to cover a booking deposit (usually 10% of any asking price).

After that it comes down to if you need/want to sell to buy. Without knowing your circumstances I'll assume you will need to use the equity you have in your existing home to fund the balance. If this is the case you might as well put any additional funds to work now and pay down your mortgage. Think deposit rate of 0% Vs interesting savings on a mortgage at 2ish%.

At the other end of the spectrum if you want to retain your existing property or have it overlap for a short period with your second property, you'll need to finance 20% (and possibly more) out of current and future savings. In reality it's probably not economical or feasible for the majority of people to be in a position to retain and purchase. With a growing family this is likely to be even less of a possibility I would think.

I would be selling the house and purchasing the next, no desire to attempt to become a landlord at this stage.

I am surprised you would need 20% cash on hand to pay the deposit, surely that comes from the equity in the house to be sold? I understand you'll need the booking deposit (which was certainly less than 10% for my current house!).

So sounds like keep a chunk of cash savings for the likes of booking deposit etc but OK to put the bulk to work against the mortgage over the next while.

Markel said:

I am surprised you would need 20% cash on hand to pay the deposit, surely that comes from the equity in the house to be sold?

Click to expand...

That would require getting into a chain and these can be very difficult to pull off as a few recent threads here will confirm.

Leo said:

That would require getting into a chain and these can be very difficult to pull off as a few recent threads here will confirm.

Click to expand...

on the flip side what is the likelihood of getting mortgage approval for another mortgage while servicing the existing, a chain is most peoples only option, deposit or no deposit, when trading up.